Interesting to see how in Malaysia analysts are saying to let the “market forces” to work while in Singapore the Government has made the market forces working in favor of a more stable and long lasting Property prices situation. Still I personally consider Malaysia a very good destination for Property investors, the only recommendation to both developers and speculators I would give is to look more into medium long term investments. Properties shouldn’t be looked at as shares or currencies that you can convert in cash in minutes……
S’pore shows how to crack down on bubble
SINGAPORE, the city-state that banned chewing gum to curb litter, is showing the rest of Asia how to cool a housing bubble.
The government this year ramped up efforts to bring down property prices that surged to a record, adopting some of its strictest measures, including a cap on debt at 60% of a borrower’s income, higher stamp duties on home purchases and an increase in real estate taxes. The combination and timing of the curbs is the most comprehensive among governments battling housing bubbles, according to Vishnu Varathan, an economist at Mizuho Bank Ltd.
The curbs are proving more successful than in Hong Kong and China where policymakers have experimented with a variety of initiatives to temper soaring housing markets. Home prices in Singapore have gained 33% since 2009, while they have more than doubled in Hong Kong in the period.
“The government has enacted all these measures quite early,” Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian Pte, the securities unit of Southeast Asia’s third largest lender, United Overseas Bank Ltd, said. “They want to contain a bubble from reaching levels where it brings down the whole system.”
Home prices in Singapore had the slowest growth in six quarters in the three months ended Sept 30. Sales declined and mortgage growth fell to 13% in July from 18% two years ago.
The city-state began introducing curbs four years ago after home prices climbed 25% in the two years to 2008. The government of Prime Minister Lee Hsien Loong intensified efforts as prices jumped a further 40%, driven by low interest rates, demand from local Singaporeans to upgrade from government to private housing, as well as buyers from China and Southeast Asia.
The gains led to Singapore being ranked the most expensive city to buy a luxury home in Asia after Hong Kong by property broker Knight Frank LLP in a wealth report in March. Shanghai was ranked third and Beijing fourth in the report as at the fourth quarter of 2012.
The average price of a new 1,000 sq ft condominium is between S$1 million (RM2.55 million) and S$1.2 million, according to London-based broker Savills plc. In Hong Kong, where prices have more than doubled since early 2009, the average for a similar size apartment is between HK$8.1 million (RM3.3 million) and HK$12.8 million, according to Midland Holdings Ltd, the city’s biggest realtor.
Payments capped In Singapore, the government raised the minimum down payment on second home purchases, brought in new taxes for foreign and corporate buyers, and added a stamp duty for all residential properties. The Monetary Authority of Singapore said on June 28 that home loans should not exceed a total debt- servicing ratio of 60%. In August, the central bank then cut the maximum period for new loans to buy public housing, where about 80% of Singaporeans live, by five years to 25 years. Mortgage payments were capped at 30% of gross monthly incomes, down from 35%, according to the Housing and Development Board.
“The loan measures are more lethal than the other measures,” said David Neubronner, national director of residential project sales in Singapore at broker Jones Lang LaSalle Inc. “Home prices will remain flat for the next six to nine months.”
The restrictions are already deterring potential buyers such as Jeremy Ong, a Singaporean dentist, who was prepared to spend S$2 million to buy an apartment.
“The latest loan measures are tough and interest rates are going to go up,” said Ong, 32, who had been looking for a three-bedroom apartment near the upscale Orchard Road shopping district. “I planned to take a loan for 80% of the home value, but I’m not sure with the new rules how much I’ll get since I also have a car loan.”
While an index of private residential property prices rose to a record 216.2 points in the quarter ended Sept 30, the 0.4% increase was the smallest since the first quarter of 2012, according to preliminary figures from the Urban Redevelopment Authority (URA) on Oct 1.
Apartment prices fell 0.5% in prime districts in the third quarter, more than the 0.2% decline in the previous three months, the URA data on Oct 1 showed.
The city’s private home sales slid 52% to 1,246 in September from a year earlier, the authority said yesterday.
Neubronner estimates private new home sales this year could drop to 15,000 units from 22,197 units in 2012.
“This is what the regulator wants; the key objective is to moderate the loan growth and price correction with the measures put in place,” said Linda Lee, Singapore-based senior vice-president of deposits and secured lending at DBS Group Holdings Ltd, Southeast Asia’s largest lender. “They also want the consumer to be more prudent when applying for loans so they can control the overall debt in the country.”
Hong Kong’s government, in February doubled the stamp duty on all properties above HK$2 million and raised the minimum mortgage down payment requirements on all non-residential properties.
“Obviously, the tighter housing supply situation means Hong Kong has fewer tools to fight gains in home prices compared with Singapore,” said Hong Kong-based Buggle Lau, chief analyst at Midland Holdings Ltd.
The city’s curbs are starting to show some effects. There were about 11,000 home transactions in the third quarter, the lowest since the government’s Land Registry began making the data available in 1996. Residential prices will fall 15% to 20% in 2014 and are expected to decline 5% this year, according to UBS AG.
While some may find Singapore’s property rules “draconian”, authorities should be pre-emptive and proactive, said Varathan at Mizuho Bank.
“It’s commendable,” Singapore-based Varathan said. “These are prudential measures to make sure that you don’t get an Asian version of the mortgage crisis in the US.” — Bloomberg
This article first appeared in The Edge Financial Daily, on October 17, 2013.
Source : TheEdge